2012 'was year of annuities'
13 December 2012
Older individuals planning their retirement finances may be tempted by a product such as an annuity that can provide them with a regular income once they have given up work.
According to Billy Burrows, director of The Retirement Academy, 2012 was the year that annuities found a place in the mainstream and they are now widely considered to be at the forefront of retirement options for older people.
Writing for Money Marketing, he argued investment linked, fixed term annuities and unit linked guarantees have all gained recognition in the mainstream during 2012.
Mr Burrows pointed out that despite the fact annuities rates have fallen over the course of the last 12 months, the number of enhanced annuities arranged increased as providers have launched a range of new products to attract customers.
"This market is bound to increase next year as more and more annuitants qualify for enhancements," he predicted, suggesting it may be the case that within the space of a few years, all annuities could be medically underwritten.
It is expected that the arrival of the Retail Distribution Review (RDR) early next year is going to have an impact on the state of the annuities market in the UK.
Mr Burrows claimed one of the most "damaging unintended consequence of RDR" could be that there is a reduction in the number of people getting advice about annuities.
He explained this is a worry as it may mean clients do not get the best outcomes without advice, while he noted that there is a danger many non-advised sales might turn out to be "advised sales in disguise".
Recent data released by MGM Advantage showed that annuity rates on conventional products have gone up over the course of the last two months.
Figures from the firm showed men have seen conventional rates rise by 0.2 per cent in recent weeks, while for women the increase has been 2.27 per cent.
Annuity rates are expected to be affected by the introduction of the EU Gender Directive, which prevents providers from using gender as a criteria for setting rates and is due to come into effect later this month.
Individuals wishing to learn more about annuities can contact Key Retirement Solutions.